Hike in Fuel Prices Minimal: Deora

New Delhi
Hike in Fuel Prices Minimal: Deora
With Opposition parties stalling Parliament over price rise, Oil Minister Murli Deora today said the hike in domestic LPG rates translated into less than a rupee per day burden on consumers and 50 paisa a day for PDS kerosene users.

"No government can survive if they don't know the feeling of voters. We want people and Opposition parties to understand the compulsions under which we took this decision and the minimal impact it will have on people," he said here.

Describing claims made by critics of the June 25 decision as "exaggeration", he said the Rs 35 increase in the price of LPG cylinders translated into an additional burden of less than a rupee per day, considering that a 14.2-kg cylinder of domestic gas lasts 30-35 days.

The Rs 3 a litre hike in kerosene translated into an additional burden of 50 paisa per day for a household using 5 litres a month of PDS kerosene.

In a tongue-in-cheek comment, Deora said he met a friend from one of the Left parties this morning and explained the compulsions that led to the price hike.

"It is very difficult to show reason to Communists. God knows if he understood what I said," he said speaking at the signing of contracts for coal-bed methane blocks awarded in the fourth round late last year.

The hike had become necessary as the difference between retail selling price and cost of production had become unmanageable.

"We have kept the burden on the poor man the minimal. The talk of the hike breaking the back of the poor and common man is nothing but exaggeration," he said.

A united Opposition for the third day today stalled proceedings in Lok Sabha and Rajya Sabha, forcing adjournment of both Houses for the day without transacting much business.

Alongside the hike in LPG and kerosene rates, the prices of petrol were freed from government control, leading to an increase in the rates by Rs 3.50 per litre in Delhi from June 26. Diesel prices were increased by only Rs 2 per litre, in preparation for an eventual freeing of prices.

"The then Petroleum Minister Ram Naik (during NDA government) raised price of PDS kerosene from Rs 2.52 per litre in January, 1998, to Rs 9 per litre in March, 2002," he said. "This hike was 258 per cent, even though crude oil prices rose by just 147 per cent during the period."

The Congress-led UPA government did not increase kerosene prices for the past six years, despite the price of crude oil (the raw material for making petrol, diesel, domestic LPG and kerosene) more than doubling from USD 36 a barrel in May, 2004, to USD 78.

"We raised kerosene rates by Rs 3 per litre against the required increase of Rs 18.07 per litre," Deora said, adding that LPG continues to be under-priced by Rs 226.90 per cylinder.

The United Front government, of which the Left parties, TDP and Samajwadi Party were constituents, in November, 1997, notified full deregulation of the prices of petrol, diesel, LPG and kerosene by 2002.

According to this schedule, the rates of kerosene and LPG should have been at least double the revised price of Rs 12.32 per litre and Rs 345.35 per cylinder respectively.

"The reason for price hike was not just to make up for the losses of oil companies. It is also to stop theft and adulteration," he said.

The pre-hike price of Rs 9.32 per litre made kerosene lucrative for adulteration in fuels like diesel as also diversion in open market.

The NDA government, he said, had in April, 2002, freed petrol and diesel prices from government control, with the rates being revised twice a month based on international prices.

"We have freed prices of petrol, a fuel that is used in cars. Diesel prices will be eventually freed, but the government reserves the right to intervene in case of a sharp spike or excessive volatility in global prices," he said.

"What we did was bare necessity. We were compelled to do so because oil PSUs were faced with Rs 74,300 crore under recoveries (revenue loss on fuel sales this fiscal)," he said. "The opposition is being a hypocrite in its criticism."

Even after the hike, oil PSUs would be saddled with Rs 53,000 crore of under-recoveries. "Petrol price has increased only 53 per cent and diesel 85 per cent since May, 2004, despite crude oil prices rising by 111 per cent," he said.
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